Adobe Reports Record Quarterly and Annual Revenue

Adobe Reports Record Quarterly and Annual Revenue

Company Drives Strong Adobe Creative Cloud and Adobe Marketing Cloud Adoption in Fiscal 2012

SAN JOSE, Calif.--(BUSINESS WIRE)-- Adobe Systems Incorporated (NAS: ADBE) today reported financial results for its fourth quarter and fiscal year ended Nov. 30, 2012.


Adobe achieved revenue in Q4 FY2012 of $1.153 billion, exceeding its targeted range of $1.075 billion to $1.125 billion. During the quarter, the Company continued to accelerate adoption of Adobe® Creative Cloud™ as it migrates to a subscription model. Adobe also achieved record Adobe Marketing Cloud and Document Services revenue during the fourth quarter.

For fiscal year 2012, Adobe achieved record revenue of $4.4 billion.

Fourth Quarter Financial Highlights

  • Diluted earnings per share were $0.44 on a GAAP-basis, and $0.61 on a non-GAAP basis.

  • Operating income was $307.8 million and net income was $222.3 million on a GAAP basis. Operating income was $414.7 million and net income was $307.9 million on a non-GAAP basis.

  • Cash flow from operations was $473.7 million.

  • Deferred revenue grew by $59.3 million to a record $619.6 million.

  • Adobe added approximately 10,000 Creative Cloud subscriptions per week during the quarter, versus the addition of 8,000 subscriptions per week in the third quarter.

  • In Document Services, which includes the Adobe Acrobat® product family, Adobe also achieved record revenue of $210.2 million during the quarter.

  • Adobe Marketing Cloud achieved record quarterly revenue of $220.4 million, which represents 32 percent year-over-year growth.

A reconciliation between GAAP and non-GAAP results is provided at the end of this press release.

Fiscal Year 2012 Financial Highlights

  • Adobe achieved record revenue of $4.404 billion. Annual GAAP diluted earnings per share for fiscal 2012 were $1.66, and annual non-GAAP diluted earnings per share were $2.35.

  • Annual operating income was $1.180 billion and net income was $833 million on a GAAP basis. Annual operating income was $1.597 billion and net income was $1.183 billion on a non-GAAP basis.

  • Adobe generated $1.5 billion in cash flow during the year.

  • Creative Cloud paid subscriptions grew to 326,000 as of the end of the year, with exiting annualized recurring revenue of $153 million for the Creative business.

  • Document Services achieved record annual revenue of $786 million.

  • Adobe Marketing Cloud achieved a record $777 million in reported annual revenue, representing 35 percent year-over-year growth.

  • The company repurchased 11.5 million shares during the year, returning approximately $372 million of cash to stockholders.

Executive Quotes

"We beat our Creative Cloud subscription goals and established Adobe Marketing Cloud as the leader in the exploding category of Digital Marketing during fiscal 2012," said Shantanu Narayen, president and chief executive officer, Adobe. "In fiscal 2013 we intend to accelerate our pace of innovation, and drive integration between Creative Cloud and Adobe Marketing Cloud."

"We're driving migration to a subscription model in our Creative business faster than we predicted a year ago, and we are confident fiscal 2013 will be the pivotal year for the transition," said Mark Garrett, executive vice president and chief financial officer, Adobe. "This will yield a stronger, more predictable recurring revenue model with higher long-term revenue growth."

Adobe to Webcast Earnings Conference Call

Adobe will webcast its fourth quarter and fiscal year 2012 earnings conference call today at 2:00 p.m. Pacific Time from its investor relations website: www.adobe.com/ADBE. The company will discuss financial targets for the first quarter of fiscal 2013 as well as fiscal year 2013 on its Q4 and FY2012 earnings call. A copy of Adobe management's prepared remarks, including financial targets and conference call slides, has been posted to Adobe's investor relations website in advance of the conference call for reference.

A reconciliation between GAAP and non-GAAP financial targets is also provided on the website.

Forward-Looking Statements Disclosure

This press release contains forward-looking statements, including those related to the transition of our business as we migrate to a subscription model, increases in recurring revenue, long-term revenue growth and our ability to continue to innovate and execute against our strategy in our key growth areas and drive integration between those areas, which involve risks and uncertainties that could cause actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to: failure to develop, market and distribute products and services that meet customer requirements, introduction of new products and business models by competitors, failure to successfully manage transitions to new business models and markets, including our increased emphasis on a cloud and subscription strategy, fluctuations in subscription renewal or upgrade rates, continued uncertainty in economic conditions and the financial markets, difficulty in predicting revenue from new businesses and the potential impact on our financial results from changes in our business models, and failure to realize the anticipated benefits of past or future acquisitions.

For a discussion of these and other risks and uncertainties, please refer to Adobe's Annual Report on Form 10-K for the fiscal year ended December 2, 2011 and its Quarterly Reports on Form 10-Q for the fiscal quarters ended March 2, 2012, June 1, 2012 and Aug. 31, 2012.

The financial information set forth in this press release reflects estimates based on information available at this time. These amounts could differ from actual reported amounts stated in Adobe's Annual Report on Form 10-K for our year ended Nov. 30, 2012, which Adobe expects to file in Jan. 2013.

Adobe assumes no obligation to, and does not currently intend to, update these forward-looking statements.

About Adobe Systems Incorporated

Adobe is changing the world through digital experiences. For more information, visit www.adobe.com.

© 2012 Adobe Systems Incorporated. All rights reserved. Adobe, the Adobe logo, Creative Cloud and Acrobat are either registered trademarks or trademarks of Adobe Systems Incorporated in the United States and/or other countries. All other trademarks are the property of their respective owners.

Condensed Consolidated Statements of Income

(In thousands, except per share data; unaudited)

Three Months Ended

Year Ended

November 30,
2012

December 2,
2011

November 30,
2012

December 2,
2011

Revenue:

Products

$

852,843

$

931,895

$

3,342,843

$

3,416,483

Subscription

194,537

128,437

673,206

458,634

Services and support

106,048

91,829

387,628

341,141

Total revenue

1,153,428

1,152,161

4,403,677

4,216,258

Cost of revenue:

Products

28,687

34,048

121,663

125,640

Subscription

59,308

51,334

219,102

194,033

Services and support

36,983

30,997

143,017

118,200

Total cost of revenue

124,978

116,379

483,782

437,873

Gross profit

1,028,450

1,035,782

3,919,895

3,778,385

Operating expenses:

Research and development

195,047

195,403

742,823

738,053

Sales and marketing

402,181

368,330

1,516,159

1,385,822

General and administrative

111,449

119,586

434,982

414,605

Restructuring and other related charges

(275

)

94,502

(2,917

)

97,773

Amortization of purchased intangibles

12,283

11,830

48,657

42,833

Total operating expenses

720,685

789,651

2,739,704

2,679,086

Operating income

307,765

246,131

1,180,191

1,099,299

Non-operating income (expense):

Interest and other income (expense), net

(718

)

(1,351

)

(3,414

)

(2,974

)

Interest expense

(16,767

)

(16,774

)

(67,487

)

(66,952

)

Investment gains (losses), net

351

5,174

9,504

5,857

Total non-operating income (expense), net

(17,134

)

(12,951

)

(61,397

)

(64,069

)

Income before income taxes

290,631

233,180

1,118,794

1,035,230

Provision for income taxes

68,298

59,461

286,019

202,383

Net income

$

222,333

$

173,719

$

832,775

$

832,847

Basic net income per share

$

0.45

$

0.35

$

1.68

$

1.67

Shares used to compute basic net income per share

494,906

491,523

494,731

497,469

Diluted net income per share

$

0.44

$

0.35

$

1.66

$

1.65

Shares used to compute diluted net income per share

502,154

496,288

502,721

503,921

Condensed Consolidated Balance Sheets

(In thousands, except par value; unaudited)

November 30,
2012

December 2,
2011

ASSETS

Current assets:

Cash and cash equivalents

$

1,425,052

$

989,500

Short-term investments

2,113,301

1,922,192

Trade receivables, net of allowances for doubtful accounts of $12,643 and $15,080, respectively

617,233

634,373

Deferred income taxes

59,537

91,963

Prepaid expenses and other current assets

116,237

133,423

Total current assets

4,331,360

3,771,451

Property and equipment, net

664,302

527,828

Goodwill

4,133,259

3,849,217

Purchased and other intangibles, net

545,036

545,526

Investment in lease receivable

207,239

207,239

Other assets

93,327

89,922

Total assets

$

9,974,523

$

8,991,183

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Trade payables

$

49,759

$

86,660

Accrued expenses

590,140

554,941

Capital lease obligations

11,217

9,212

Accrued restructuring

9,287

80,930

Income taxes payable

49,886

42,634

Deferred revenue

561,463

476,402

Total current liabilities

1,271,752

1,250,779

Long-term liabilities:

Debt and capital lease obligations

1,496,938

1,505,096

Deferred revenue

58,102

55,303

Accrued restructuring

12,263

7,449

Income taxes payable

155,096

156,958

Deferred income taxes

265,106

181,602

Other liabilities

50,084

50,883

Total liabilities

3,309,341

3,208,070

Stockholders' equity:

Preferred stock, $0.0001 par value; 2,000 shares authorized

Common stock, $0.0001 par value

61

61

Additional paid-in-capital

3,038,665

2,753,896

Retained earnings

7,003,003

6,528,735

Accumulated other comprehensive income

30,712

29,950

Treasury stock, at cost (106,702 and 109,294 shares, respectively), net of reissuances

(3,407,259

)

(3,529,529

)

Total stockholders' equity

6,665,182

5,783,113

Total liabilities and stockholders' equity

$

9,974,523

$

8,991,183

Condensed Consolidated Statements of Cash Flows

(In thousands; unaudited)

Three Months Ended

November 30,
2012

December 2,
2011

Cash flows from operating activities:

Net income

$

222,333

$

173,719

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, amortization and accretion

78,621

73,290

Stock-based compensation expense

73,535

72,527

Unrealized investment gains

(281

)

(5,811

)

Changes in deferred revenue

59,232

47,399

Changes in other operating assets and liabilities

40,219

135,629

Net cash provided by operating activities

473,659

496,753

Cash flows from investing activities:

Purchases, sales and maturities of short-term investments, net

(33,250

)

18,826

Purchases of property and equipment

(81,789

)

(74,897

)

Purchases of long-term investments, intangibles and other assets, net of sales

(14,436

)

(51,684

)

Acquisitions, net of cash

(151,925

)

Net cash used for investing activities

(129,475

)

(259,680

)

Cash flows from financing activities:

Purchases of treasury stock

(100,000

)

Reissuance of treasury stock

19,089

1,191

Repayment of debt and capital lease obligations

(2,985

)

(2,243

)

Excess tax benefits from stock-based compensation

3,477

853

Net cash used for financing activities

(80,419

)

(199

)

Effect of exchange rate changes on cash and cash equivalents

(1,093

)

(16,586

)

Net increase in cash and cash equivalents

262,672

220,288